Abc co and xyz co are identical firms in all respects

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ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all-equity financed with $540,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $270,000 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $73,000. Ignore taxes.

Rate of return % 17.04

What is the cost of equity for ABC? What is it for XYZ? Round your answers to 2 decimal places.

Cost of equity
ABC %
XYZ %

Reference no: EM13598189

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